After hitting a seven-week high earlier today, oil prices pared some gains as geopolitical reclaimed focus in the second half of the day and following the American Petroleum Institute's (API) data showing an unexpected rise in U.S. crude stockpiles yesterday.
The Juneteenth federal holiday in the U.S. meant low trading activity for commodities on Wednesday, and markets will have to take an extra day to receive the official U.S. stockpile report from the Energy Information Administration (EIA).
At 3:35 p.m. ET on Wednesday, Brent crude was trading down 0.30% at $85.07, while West Texas Intermediate (WTI) was trading down 0.10% at $81.47.
"The current snapshot presents an underwhelming picture but there are green shoots that indicate a more optimistic outlook," Tamas Varga of oil broker PVM told Reuters on Wednesday, adding that recent prices show "genuine optimism that the global oil balance will eventually tighten."
In a report released on Tuesday, Standard Chartered put actual April oil demand at 101.77 million barrels per day, or 470,000 bpd higher than its previous forecast. Previously, Standard Chartered forecast that global oil demand would reach a new all-time record in May and then go beyond that in June. With the Tuesday report, the analysts are reiterating that forecast, even slightly revising their May and June demand projections upwards.
"Given the strong improvement from March, we think the April numbers represent an important break from the highly bearish demand narrative and associated weak sentiment that has dominated oil markets over the past couple of months," Standard Chartered wrote.
"We think prices could make a relatively rapid move higher towards USD 90 per barrel (bbl), helped by the tailwinds of further speculative short-covering, some precautionary consumer hedging and a likely improvement in the strength of high-frequency US oil data. SCORPIO, our machine-learning oil price model, is more cautious and indicates a 24 June Brent settlement of USD 84.00/bbl, with technical indicators the main drag on prices (the 50-day,100-day and 200-day Brent moving-averages are all close to USD 84/bbl)," StanChart added.
By Charles Kennedy for Oilprice.com
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